The Impact of Loyalty Programs on Business Performance

Uh, the actual, you know, business results, KPIs, ROIs, and all those acronyms that you learn in business school. So, uh, but before we get there, I'm going to turn it over to you guys. James, I'll start with you. Can you give us a little bit of a lay of the land in terms of loyalty? When we talk about loyalty programs or customer loyalty, especially as Switchfly sees it, what would you say? How would you describe that?

What are the different tiers or mechanics when it comes to loyalty from your perspective?

You That free coffee or whatever that, you know more transactional based reward is and it it's a great relationship, you know helps me um increase My usage of their products they get higher sales um, obviously, you know, you You get all these micro conversions whether it's even just getting me to download an app And they're able to in a very cost effective way Um, and then from there, you have, you move up the value ladder to, um, more aspirational type relationships where, you know, my Uber

point and partnerships were like by Uber points, uh, or sorry, my Uber spend when I go to an airport can accrue my SkyMiles account, et cetera, where you get some of these brand crossovers and there's, um, synergies, but it's still a more transactional relationship and then from there you get into much more, um, yeah.

Kind of I call it a walled garden kind of like using iOS where there's a ton you can do Within an ecosystem thinking of like your credit card reward points, right where I may not directly spend money with my bank And the actual, you know credit card swipes, but through the transactional value They're generating a ton of revenue off their user install base And that's really where we can start to explore. What else can we do? Um, does that mean Status accruals and access to an airport lounge.

Does that mean?

Um, you know these more aspirational rewards where a switchfly would come in and we're able to power, you know Travel getaways based on points accrual and that's really where um The more progressive and the more innovative brands are kind of doing a bit of all of the above where, you know, you're going to have that transactional point accrual based on, you know, how much you spend with a brand, but then there's all these other options with, you know, cross promotion with adjacent logos, as well

as, you know, things that are just there to delight the customer where, you know, you get a bag tag based on status and you get to, you know, kind of flex that you're a brand loyalist. Um, in a way that, you know, everyone gets that win, um, but definitely it goes above and beyond just that basic, you know, Hey, Brandon, I sell coffee every time you spend 5, I'll punch your card.

I'm connected as like a member and i'm i'm like glad to be a card holder because I get all this great stuff but then to your point you get all these added benefits of being like a I'm a gold member with like a bunch of different rental car companies and hotels and so I get free upgrades or I get I'm going to london in a couple of weeks and I get a hundred dollars worth of Um, breakfast at this hotel that I'm staying at because I'm a card holder and it makes me feel like I should be very loyal to

American Express because they are helping me so much enjoy the luxurious life. So anyway, uh, so that's, that's where my mind goes. Uh, so Rachel, I want to bring you in, um, give, can you give any other color on how you see, uh, loyalty as well, or any kind of personal examples that you might have the way you use it?

not just with that individual, but all of the individual's connections because they want to brag about it. They want to say, Oh, this is my experience that I've had. I've loved it. And then all of a sudden you're getting all of that referral information. So that's how I view loyalty. It's much softer than the, than the transactional or like the actual, um, you know, mechanics of the loyalty program, but I see it as more of a relationship. Yep.

And really, we're switchfly tries to, um, help our partners get even more, um, Juice out of that squeeze is the aspirational side where hey, I got this amazing trip So whether it's a honeymoon or just a weekend getaway You know The brand is also able to be part of that story in a way that I'm not bragging about like my points were like hey Brandon, I got a 1. 5 X point return on gas stations this quarter. No, no one cared like Don't post that.

Um, but you know, hey, I was able to get a free flight to Paris Through, you know, my credit card program, that's really the aspirational, plus the transactional, plus, um, just that tiered loyalty status accrual as well, right, where you're getting a ton of value for a bunch of brands and a bunch of different avenues, and in a way that doesn't cost them an arm and a leg to get you to come back, you know, we're talking about, we're talking about pennies on the dollar versus all the effort and

work that these brands have to do to get that first time you in the door the first time. Right, you already got James, Brandon, or Rachel through the door. How do you keep me coming back? You know, usually it starts with the transactional and then quickly moves up the value ladder the more someone's willing to engage with the brand.

There's, there's a lot of, um, There's a lot of data to support that, which we'll get into in a second, because you guys have a great infographic on this topic. But before we get there, uh, so, uh, another component of what is very helpful about all these loyalty programs in this kind of ecosystem or world that we've been describing here is that it produces a lot of data that you have on your customers. And so because of that.

Thanks to a lot more advanced technology, even a lot of AI tools that are coming out and have been out for the last 20 years, but you know, are still getting refined is that you can create a lot more personal offerings, feeling like you actually do know your customers because you have this data on them. So it's a win for the business because they can, uh, create better, you know, market segmentation customer, you know, understand the customer a lot better and provide a lot more value to them.

But then also the customer feels like, wow, they really know me. They're offering things to me that I actually do want because they know me. Um, so there, and there's a lot of, you know, there's privacy things all in there. There's a lot of topics that you can cover. But, um, how do you guys. See, and James, I'll start with you again. Uh, how do you guys see personalization in the midst of this ecosystem of loyalty? Um, how do you view that?

How can, how have you seen businesses use that data to create really like personalized offers or refine the way that they're doing their marketing? Uh, yeah. So I'll let you speak to that a little bit.

There's a specific number of airports, um, that he's going to look at that impacts routes that impacts, you know, whatever, um, same with my Amazon recommendations, right?

And the signal to noise ratio is really what the brands need to focus on where you're delivering based on past experiences and you can apply an AI model or just, you know, simple, you know, kind of detective work, um, to be able to say, you know, Hey, James, James bought a 3d printer is probably going to buy filament or, um, if you're a normal human being, James bought a bunch of cooking tool, like a new pots and pats that maybe need some utensils or Tupperware.

Um, and that's really where, you know, it can be intelligently implemented versus, you know, hey, you went to this hotel once in London, haven't been back in five years, here's an offer, um, which is kind of where it's like, yeah, you're just spring and praying and end of the day, short answer is you really just need to balance relevant and timely, um, with some just good, you know, um, Um, Level of gut check or data to balance, to balance the two because there's two extremes and both can be,

um, a bit unpleasant for the user.

You know, you, they're providing you with some demographic data, and you know, then you move into like the purchase history, and you know, if you allow them to set some preferences, like there's all of that data that they're already providing you just as a part of your program, but then when they go into it further, there's transactional data, so like I personally am an REI member, I love REI, and they, their program, I love when they send out their emails, because my significant other is also a

member of their REI program, of the REI program, and we get two different emails. Completely different emails, and it's because the way they are tailoring it based on my purchase history versus his purchase history. And even just how frequently both of us go into the store. We live across town from our REI, and he works right next to it, so he's there all the time.

And so he'll get more of that communication, whereas I'll get it more specifically when there's like deals that are happening or something along those lines. So, I think just timely communication from a marketing perspective, that, that's always going to be how you can tap into your loyalty program data. Um, but I also look at it from the perspective of Non members versus members. How much data are you getting? And, you know, we talked about our infographic.

That's one of the things that we discovered was, you know, 34 percent of businesses are saying that their loyalty program members are providing them with more insights than non members and just individuals who are going to their store and purchasing or, you know, making those, those, those flight purchases, et cetera. When they're actually making those transactions, more data is coming from their loyalty program members.

And I think that's, when we think about the grand scheme of, you know, business value and learnings that you can take away, that's an invaluable asset from your loyalty program.

All that different behavior now to pull that off is very difficult, you know in a lot of ways You've got to know the timing the frequency You've got to know the kind of offers that they want Takes a lot of work and I know you guys have has spent a lot of work on that at switchfly doing that in a travel perspective Um, but what I love is You brought up the infographic and this infographic, which will include in the show notes, uh, there is just a lot of, of survey data to say that people will,

you know, be frequenting these, um, um, uh, businesses more often. But also that there is actually like hard data in the terms of they spend more. So here's just a few, uh, little nuggets from this infographic. This is, uh, on a one section that says what loyalty program members are saying. And this is from the bond loyalty report. And it says that 85 percent of these members say that the programs make me more likely to continue doing business with brands.

So they feel much more affinity toward the brands that they are.

Marketed to with with good data and and these relevant timely offerings And another 79 say I am more likely to recommend brands with good loyalty programs, which you just did with rei I did with american express and james was talking about, you know, the kind of chick fil a perspective things like that but then also There is a 56 percent higher repeat purchase rate from members to non members And there's also, um, six out of 10 consumers involved in loyalty programs have more positive

experiences with these brands because they believe their connection transcends a transactional. Like what you're saying, they, like your significant other actually gets different emails and they feel like they have a closer relationship to that brand. So there's, there's the soft data like polling and survey data. And then there's really hard data that says that these people are actually spending more. Turn goes down, customer acquisition costs go down, spin goes up.

So it's really amazing if you can tap into these programs and the power of them. So I guess my question is, uh, what kind of, uh, benefits or impact or ROI or KPIs, all of the, the business lingo that you guys are seeing on the. Switchfly side of things when it's related to travel. What can you tell us about the way that this is impacting either your clients or you know, just the kind of programs that you guys are building out.

So I want to talk more specifically about Switchfly, but tell me a little bit about what you're, you guys have going on and what you're seeing on your end.

You brought up Amex, and that was a really great example. You are loving the experience that you're having with this brand, and offering travel rewards, like you can through Switchfly, is, is boosting the conversion rates and those redemption rates because people are looking for that type of reward.

Platform toward travel and not just toward a gift card or marketplace or something like that. And if you find a lot of clients, find a lot of benefit out of that and their clients and their employees find a lot of benefit out of that as well. Yeah.

Um, and that's really where, you know, it's a huge opportunity for brands that are willing to step out and be different to land on a really amazing user experience by having a simple direct to book travel offering, um, really, you know, the Switchfly sales pitch of, you know, I think it was Expedia a couple of years ago published a report that there's over 30 site visits to make a single trip booking, right? When we think about all the complexity and the research.

Um, Um, you know, not only do we try to offer, you know, all the inventory types you'd want to book. Um, but I was just talking to some of our product team last night about how they continue to use Gen AI. Um, as well as just simple little product enhancements of like, what neighborhoods do I want to stay in Berlin? What activities might I want to partner with when I'm looking at a safari? You know, like all these small little transactional lifts.

Um, where, you know, it's just a search away, but it's so much more pleasant to be able to just go bang, bang, boom. Um, kind of like the difference between an all inclusive versus an a la carte, um, stay experience. Again, we want to be as flexible, um, to the traveler and their diverse set of needs as possible. But really the brands that take the lift off the customer and try to make it a more tailored experience really are the ones that win.

Because all the data that says you're more likely to increase your lifetime value. You're more likely to come back frequently based on appropriate usage of rewards and loyalty. The same data also says that, you know, anyone on this podcast is going to hop the moment they have one, definitely two bad experiences where there's certain airlines I just will not get on their plane because, you know, again, we're back to that, you know, it's kind of the old, you know.

Um, one bad experience makes up for three good ones. Like, you know, it just evolutionarily, we're wired a certain way. And customer loyalty is not immune to that pattern either.

I'm searching for a London trip So London and Oxford is where we're going and we've got different family members. We're meeting different people.

I've got a toddler and Trying to plan this trip even with you know Chachi BT and all these great tools that are out there and Google search and read it and all this it is really hard To make sure that I've got all those details lined up thinking about jet lag and when I'm gonna be At this place and do I need private transport or do I need to get a bus or tickets to this and that and there's just so much to explore. It's a huge world and then you get into paying for it.

Do I do points, cash, both? It's, it's just a lot to think about. And Rachel, I love, I love your example last episode where you talked about there's this. Bike trail that you wouldn't have found. Otherwise, if it weren't for this recommendation engine to help you understand where this was and, and, uh, I just think that kind of stuff is so powerful. And so it does create that kind of loyalty, even through good experiences.

I have nothing to do, quote unquote, with a loyalty, you know, kind of points or cash or gift cards, but creating that good experience is a part of creating that kind of loyalty.

When we remove some of that friction point by bringing it into the platform and making it housed in the same places that they would want to conduct their booking, you're removing not only their time and helping with Um, you know, their, their investment of planning this trip, but you're also, you know, making it a smoother process and more likely to book, like, instead of abandon.

So definitely, definitely see the benefits from just like a user perspective, but all of that effort also enhances your bottom

Okay. So, uh, I want to dig in more to the actual metrics of, uh, loyalty and, and kind of, uh, again, the impact on business performance. So Rachel, I'll, I'll start with you. What are you seeing and kind of the metrics that you're seeing for, uh, measuring this well and making sure that your, your programs are performing well in a business perspective.

So just tapping into, when we go back to the data that they're providing, there is definitely the opportunity for you to just dive a little bit deeper from, um, from that perspective and, you know, all the while making sure you're keeping a pulse on, on those, you know, typical loyalty program rates. Um, but you can also, you know, dive into those even further. Are people, you know, is the average order value for, um, flights going up versus when you have packaging and dynamic packaging?

Are you increasing, you know, your, your additional revenue streams from that perspective? Those are all things you should be keeping a pulse on for sure.

It's just these little These little, you know, boops, like surprise and delight. And one that comes to mind is last year I was in London and, uh, had a hotel person give my little daughter, she was a year old at the time, give her a little stuffed dinosaur. And I was like, oh, I wasn't expecting that. And I know it cost him 2 to get this thing. But it's this thing that I remember. That it was a nice little, nice little delight.

from the book or the movie that they're, they're going for, um, we're going because Covington is a really big filming location, and we wanted to see some of our favorite spots, so.

But like it's right around the corner and it always is mind blowing when you're walking through town like Where people are coming in from it was also super creepy to walk through town Back when they still had like the steel walls up because it did legitimately look like something was going on. But um You know, sometimes like the out of the way spots are really the gems of your travel experience

And so I think it's so important that you guys are doing this work and I know there's all, it's a big world, uh, but I really appreciate the way that you guys are approaching it and even building products to serve your customers in this way. So we will hopefully see you guys again in the future and We'll call us a wrap on episode 26. Thank you. See you guys